BOS: Chapter 5 Reach Beyond Existing Demand 10:00am 3/22/19 Team 3 Kaitlyn Thompson, Jess Francis, Anthony Greer, Marcos Acosta

How to Maximize your Blue Ocean Size: Reach beyond existing demand A key component in achieving value innovation. Companies need to challenge two conventional strategy practices The focus on existing customers The drive for finer segmentation to accommodate buyer differences Typically, to grow their share of the market companies strive to retain and expand existing customers. This then leads to finer segmentation and tailoring of offerings to better meet customer preferences. The more intense the competition, the greater the resulting of the customization of offerings. Embracing customers through finer segmentation they often create too small of target markets. To maximize, companies need to take a reverse course Companies need to focus on Non Customers rather than existing customers Instead of focusing on customer differences, they need to focus on powerful commonalities in what buyers value This allows companies to reach beyond existing demand to unlock a new mass of customers.

The 3 Tiers of Noncustomers Even though Non Customers offer big Blue Ocean opportunities, very few companies have knowledge of who Non Customers are and how to unlock them. Tier 1 is the closest to your market. They are buyers who minimally purchase your industry’s offerings out of necessity. They are waiting to jump ship as soon as they are presented the opportunity. Tier 2 are people who refuse to use your industry’s offerings. They have seen your offerings as an option to fulfill their needs but have voted against them. Tier 3 is the farthest from your market. Non Customers who have never thought of your offerings as an option. By focusing on key commonalities across these noncustomers and existing customers, companies can understand how to pull them together into their new market.

1st Tier non-customers These are soon-to-be non customers are those who minimally use the current market offerings to get by, as they search for alternatives. A market will become stagnant as these type of noncustomers increase Although there are pessimistic views of 1st tier non customers there are still opportunities to untap the demand in this segment. Non customers are able to provide more insight into how to grow than current existing customers

2nd Tier non-customers These are the “refusing” noncustomers, people who either do not use, or can not afford to use offerings in the current market. JCDecaux advertising example Created a breakthrough in value that was provided to 2nd tier non-customers. This ultimately allowed a mass of refusing non-customers to flock to the advertising industry By focusing on 2nd tier refusing non-customers, by adding value, a company can increase its demand for whatever it is offering within its existing consumers as well as being able to capitalize in a market segment that would not normally be interested otherwise.

3rd Tier non-customers “Unexplored” customers and are considered to be the farthest away from an industries existing customers. Typically not targeted because it is assumed that their business opportunities and needs belong to other markets. Oral care company example US Military example Once previously unexplored markets are realized, good execution is crucual.

Go for the Biggest Catchment Searching for one tier of non-customers is not the answer Focus one the largest catchment available Combine tiers if you can Maximize the scale of your blue ocean Reach beyond existing demand to non-customers Avoid expanding existing customer demand if possible This leads to a blue “puddle” Focusing on existing customers allows competition to capture non-customers This could also sway your existing customers to the competition

Key Takeaways Find your non-customers and which tier they belong to Exploit access to untapped demand Do not chase after one tier, search for the biggest catchment Be aware of your competitions advancements Work toward a blue ocean, not a blue “pond” or “puddle”